Scott McNealy stepped down as Sun Microsystems (SUNW) Inc.'s CEO after failing to stem huge losses at the company he started 24 years ago. McNealy, 51, will remain chairman, Sun said in a statement. Current president Jonathan Schwartz, 40, will take over the CEO duties.
Schwartz has a big challenge ahead of him as the company has losses of $4.51 billion from 2002 to the end of 2005.
John Buckingham, who oversees $875 million at Al Frank Asset Management Inc. said "Folks wanted to see new blood at the company, McNealy was a hero in the late '90s, but he's a goat today. It's what the market wanted to see."
Some analysts were caught off guard as McNealy said in February that he would keep the job as long as the board had confidence in him running Sun. He said he was "here for the duration and I'll do whatever I can."
Shares of Sun soared 42 cents, or 8.4 percent, to $5.40 based upon the news. Rob Enderle, president of Enderle Group commented that "This goes to show how unhappy folks were with Scott, this is a company that's damaged property."
"Sun's problems began as the server market slid and his dot- com customers went under. Bigger clients switched to buying cheaper servers from Dell (DELL) and Hewlett-Packard (HPQ) Co. Sun's server sales fell 11 percent to $1.19 billion in the fourth quarter, according to market researcher IDC of Framingham, Massachusetts. International Business Machines (IBM) Corp., Hewlett-Packard and Dell each expanded sales," IDC said.
Dennis Gaughan, an analyst at AMR Research in Boston added that "Sun has been stagnating while others, like HP and IBM, continue to move forward, this is the opportunity for a new regime to see if they can right the ship."
They really did need new blood as after the dot-com bust, Sun has never recovered. There seems to be no long-term or short-term strategy in place to make Sun a leader in their industry. I wonder if Jonathan Schwartz will have it in him to do it?
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